Question

An investment project provides cash inflows of $570 per year for eight years. What is the project payback period if the initial cost is $1,675? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Payback period 2.98 years What is the project payback period if the initial cost is $3,275? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Payback period years What is the project payback period if the initial cost is $4,800? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Payback period years

Answer 1

Answer:

Invest. Cash Flow   Payback  

-$1,675   $570        2,94  

-$3,275   $570          5,75  

-$4,800   $570        8,42  

Explanation:

The payback period method gives the total time necessary to get back the money invested in a project considering the each year cash flows.

As here the Cash flow are the same each year only it's necessary to divide de amount invested by the annual cash flow expected.

Invest. Cash Flow   Payback  

-$1,675   $570        2,94  = $1,675/$570

-$3,275   $570          5,75   = $3,275/$570

-$4,800   $570        8,42   = $4,800/$570